European software stocks leap on HP's Autonomy bid

By IBT Staff Reporter On 08/19/11 AT 12:32 PM

Shares in European software makers jumped in a falling market on Friday on hopes they were more likely bid targets after Hewlett-Packard's $11.7 billion bid for British enterprise search-software maker Autonomy.

Rajeev Bhal, software analyst at British financial services firm Matrix Group, said he saw Micro Focus and Temenos as likely targets but not Software AG or British accounting software maker Sage, which he saw as red herrings.

We continue to see Micro Focus (BUY, 420p TP) as a likely bid candidate given multiple approaches already in place and the attractive valuation, he wrote.

Temenos has a strong product and routinely tops industry league tables for new customer wins, and has demonstrated in the past its ability to recover from setbacks.

HP said late on Thursday it was in talks to buy Autonomy and to spin off its personal computer business, the world's largest, beginning a reinvention of itself as a higher-margin, software-focused business.

Shares in Autonomy itself leapt 75 percent to a 10-year high of 2,500 pence, below HP's bid of 2,550 pence per share, which represents a premium of 79 percent to Thursday's closing price. Autonomy has recommended the bid.

Shares in British chip designer ARM, which like Autonomy is part of a technology cluster in the English university town of Cambridge, also rose 2.9 percent.